As a residential appraiser, some of the most critical moments during an inspection involve identifying and documenting property defects. Whether it's a leaky roof, a cracked foundation, or stained carpeting, how we report these issues is fundamental to a credible appraisal. The shift to UAD 3.6 and the redesigned URAR fundamentally changes how we document these findings, moving us away from lengthy narratives toward a more structured, data-centric approach.

From Narrative to Structured Data: The New "Defects" Section

In the past, we might have described a significant issue in a free-form text block. The new URAR replaces this with a clear, structured table designed for consistency. The SF1 report provides a perfect example with a damaged roof.

On page 4 of the report, under Apparent Defects, Damages, Deficiencies Requiring Action, we see this breakdown:

  • Feature: Dwelling Exterior
  • Location: Section of Roof
  • Description: Damaged roof with missing flashing leaving the roof permeable to water intrusion.
  • Affects Soundness or Structural Integrity: Yes
  • Recommended Action: Repair
  • Estimated Cost to Repair: $1,500

This format leaves little room for ambiguity. Each element of the defect is captured as a discrete data point, making the report easier for lenders, underwriters, and review systems to parse and understand.

Connecting Defects, Condition, and the Final Value

This new structure for reporting defects is directly tied to the property's condition rating and the final opinion of value. The SF1 scenario illustrates this relationship:

  • "As Is" Condition: Because of the damaged roof, the property's As Is Overall Condition Rating is C5.
  • "Subject to Repair" Valuation: The appraisal is made "Subject to Repair," clarified in the Final Value Condition Statement.
  • Hypothetical Condition: The final opinion of value ($491,000) is based on the hypothetical condition that the roof is repaired. Once repaired, the Overall Condition rating improves to C4.

This workflow provides a transparent and logical path from identifying a problem to concluding a credible, well-supported value.

What About Minor Issues?

Not every defect affects structural integrity or requires a cost to cure. The new URAR accounts for this as well. An interior defect example:

  • Feature: Flooring
  • Location: Dining Room
  • Description: Carpet is stained in one corner of the Dining Room.
  • Affects Soundness or Structural Integrity: No
  • Recommended Action: None

The appraiser can note a minor cosmetic issue, fulfilling their obligation to report what they observe, without it impacting the cost-to-cure calculations.

The Integral Role of Photos

The new report format also tightly integrates photographic evidence. The SF1 example includes dedicated exhibits for "Damaged Flashing" and "Damaged Flooring." This ensures that every noted defect is supported by clear visual evidence, directly linked within the report.

For appraisers on-site, this means that capturing specific, well-labeled photos of every issue is more important than ever. Tools like ValueMate, which automatically generate a 3D model and organize photos by room and feature during the property scan, can help ensure this documentation is captured efficiently and accurately.

The changes to how we report defects in the redesigned URAR are a significant step toward greater clarity and standardization. By embracing this structured format, we can deliver reports that are not only more defensible but also easier for our clients to understand and act upon.